Samsung scales down LED lighting as outlook dims

SEOUL, Oct 27 (Reuters) - Samsung Electronics Co Ltd
said on Monday that it will cease its light emitting
diode (LED) lighting business outside of South Korea, scaling
back what was identified as a key growth business just four
years ago.

The pullback comes on the heels of Dutch rival Philips'
recent decision to spin off its century-old lighting
business. Price wars have slashed profitability to levels deemed
too unattractive in the long run, despite an LED boom that has
upended the global incandescent lighting industry.

Analysts say Samsung Electronics' retreat reflects the
growing competition from Chinese manufacturers even as demand
for LED lighting remains strong. LED lamps last 10 times longer
than fluorescent bulbs and 100 times longer than traditional
incandescent tungsten filament bulbs.

"It appears that Samsung decided to fold the business
because price competition was so fierce and there was not a lot
of room for growth going forward," said Seoul-based IM
Investment analyst Lee Min-hee.

Philips said in September that it will spin off its lighting
business to expand its higher-margin healthcare and consumer
divisions. Two month earlier, Germany's Osram Licht AG
, which also makes LED lights, announced a cost-cutting
plan that included nearly 8,000 job cuts.

A spokeswoman at Samsung Electronics said revenue
contribution from the business was small but did not comment on
specifics, including how much Samsung had invested.

"We will remain active in the LED industry through our LED
component business," Samsung Electronics said in an emailed
statement, adding that it will focus on areas such as
backlighting for displays of consumer products like televisions.

Samsung's decision also underscores the challenges faced by
the company and the wider Samsung Group in nurturing new growth
drivers. Samsung Electronics is battling falling profits in its
smartphone business, the world's largest, and group patriarch
Lee Kun-hee has been hospitalised since a May heart attack.

In 2010, Samsung Group identified LED, rechargeable cells
for hybrid electric cars, solar cells, medical devices and
biopharmaceuticals as new growth drivers for the conglomerate
and tipped them to generate 50 trillion won ($47.5 billion) in
annual revenues by 2020 for its affiliates.

But the conglomerate has yet gain traction in most of these
businesses. Though Samsung SDI Co Ltd is supplying
German premium automaker BMW with electric vehicle
battery cells, other businesses have yet to show significant
revenue growth.

SEARCH FOR GROWTH

Identifying and developing new growth drivers will be a key
test for Jay Y. Lee when he takes the reins at the group from
his father.

Some media reports have speculated that Samsung may also
pull back from the solar business. A Samsung SDI spokesman said
the firm continues research and development in the sector, but
analysts say the recent decline in oil prices and the entry of
Chinese players have hurt the outlook.

"These moves also give us a small glimpse of Jay Y. Lee's
management style, with him now at the helm for five months,"
said Park Ju-gun, head of corporate watchdog CEO Score.

"He's moving away from businesses like solar and LED
lighting and seem to be putting more resources in software or
platform-oriented businesses," he said, noting that Samsung
Electronics' acquisition of home automation startup SmartThings
in August as well as Lee's recent meeting with Facebook Inc
CEO Mark Zuckerberg in Seoul.